New Deal

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Top left: The Tennessee Valley Authority, part of the New Deal, being signed into law in 1933.
Top right: President Franklin Delano Roosevelt, who was responsible for initiatives and programs collectively known as the New Deal.
Bottom: A public mural from one of the artists employed by the New Deal.

The New Deal was the title that President Franklin Delano Roosevelt gave to a sequence of programs and promises he initiated between 1933 and 1938 with the goal of giving relief to the needy, reform of the financial system, and recovery of the economy of the United States during the Great Depression. The "First New Deal" of 1933 aimed at short-term recovery programs for all groups in society. Based on the assumption that the power of the federal government was needed to get the country out of depression, the first days of Roosevelt's administration saw the passage of banking reform laws, emergency relief programs, work relief programs, and agricultural programs. A "Second New Deal" (1935–36) was a more radical redistribution of power; it included union protection programs, the Social Security Act, and programs to aid tenant farmers and migrant workers. The Supreme Court ruled several programs unconstitutional (some parts of them were however soon replaced, with the exception of the National Recovery Administration). Nevertheless, there are several New Deal programs remaining in operation, some of which still exist under their original names, including the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Administration (FHA), and the Tennessee Valley Authority (TVA). The largest programs still in existence today are the Social Security System and Securities and Exchange Commission (SEC)—the primary regulator of publicly traded U.S. firms.

[edit] Origins

The New Deal represented a significant shift in political and domestic policy in the U.S., with its more lasting changes being increased government control over the economy and money supply intervention to control prices and agricultural production. The beginning of the federal welfare state; and the rise of trade unions.^[1] The success and effects of the New Deal still remain a source of controversy and debate amongst economists and historians.^[2]

On October 24, 1929, the initial crash of the U.S. stock market, known as Wall Street Crash of 1929, set off a worldwide downward spiral in every part of the globe. Then, on Tuesday October 29, the stock market fell even more than it had on October 24. This day is known as Black Tuesday.

Chart 1: GDP annual pattern and long-term trend, 1920-40, in billions of constant dollars^[3].

From 1929–1933, unemployment in the U.S. increased from the original 4% to 25%, manufacturing output plunged by approximately a third. Prices everywhere fell, making the burden of the repayments of debts much harder. The mining, lumber, and agriculture industries were hit especially hard by the stock market crash. The impact was much less severe in white collar and service sectors, but every city and state was hit hard.

Upon accepting the 1932 Democratic nomination for president, Roosevelt promised "a new deal for the American people." (The phrase was borrowed from the title of Stuart Chase's book A New Deal published earlier that year):

Roosevelt entered office with no single ideology or plan for dealing with the depression. He was willing to try anything, and, indeed, in the "First New Deal" (1933-34) virtually every organized group (including the Socialist Party) gained much of what they demanded. This "First New Deal" thus was self-contradictory, pragmatic, and experimental. The economy eventually recovered from the deep pit of 1932, and started heading upward again until 1937, when the Recession of 1937 sent the economy back to 1934 levels of unemployment. Whether the New Deal was responsible for the recovery, or whether it even slowed the recovery, is a subject of debate.

The New Deal drew from many different sources over the previous half-century. Some New Dealers, led by Thurman Arnold, went back to the anti-monopoly tradition in the Democratic Party that stretched back a century. Monopolies were a negative force in American capitalism, Louis Brandeis kept insisting, because they produced waste and inefficiency. However, the anti-monopoly group never had a major impact on New Deal policy.

From the Wilson Administration, other New Dealers, such as Hugh Johnson of the National Recovery Administration (NRA), were shaped by efforts to mobilize the economy for World War I. They brought ideas and experience from the government controls and spending of 1917-18. And from the policy experiments of the 1920s, New Dealers picked up ideas from efforts to harmonize the economy by creating cooperative relationships among its constituent elements. Roosevelt brought together a Brain Trust of academic advisers to assist in his recovery efforts. They sought to introduce extensive government intervention in the economy instead of allowing laissez-faire to run its course. New Dealers such as Donald Richberg, as the replacement head of the NRA, said "A nationally planned economy is the only salvation of our present situation and the only hope for the future."^[5] Historian Clarence B. Carson says:

At this remove in time from the early days of the New Deal, it is difficult to recapture, even in imagination, the heady enthusiasm among a goodly number of intellectuals for a government planned economy. So far as can now be told, they believed that a bright new day was dawning, that national planning would result in an organically integrated economy in which everyone would joyfully work for the common good, and that American society would be freed at last from those antagonisms arising, as General Hugh Johnson put it, from “the murderous doctrine of savage and wolfish individualism, looking to dog-eat-dog and devil take the hindmost."^[6]

The New Deal faced some very vocal conservative opposition. The first organized opposition in 1934 came from the American Liberty League led by Democrats such as 1924 and 1928 presidential candidates John W. Davis and Al Smith. There was also a large loose grouping of opponents of the New Deal who have come to be known as the Old Right which included politicians, intellectuals, writers, and newspaper editors of various philosophical persuasions including classical liberals, conservatives, Democrats and Republicans.

[edit] World comparisons

Europe

• The United Kingdom was unable to adopt major programs to stop its depression. That led to collapse of Labour and replacement in 1931 by a National Coalition (predominantly Conservative). Partially as a result there was no equivalent "New Deal" in Britain.
• France was in political crisis and its Third Republic very much contested ; the "Front Populaire" government, lead by Léon Blum, in power 1936-1938, instigated hefty social reforms. As the coalition united representatives from the centre-left to the communist party, right-wing opposition was very strong and social turmoil marred the Front Populaire term. This division left the country sourly divided in 1938-1939. Also, she tends to be forgotten
• In Nazi Germany, economic recovery was pursued through wage controls, price controls, and spending programs such as public works.
• In Mussolini's Italy, the economic controls of his corporate state were tightened.
• The USSR was mostly isolated from the world trading system during the 1930s—although the decrease in demand forced Stalin to pursue hardline development policies that led to internal famines and other calamities.
• Spain was in a Civil War after a period of political crisis.

Canada & the Caribbean

• In Canada, Prime Minister R. B. Bennett behaved roughly as Hoover had, increasing tariffs on non-British Empire goods. This exacerbated the Depression and contributed to the growth of Hooverville-like camps of the unemployed in Canada. Belatedly, he came around to a Rooseveltian-Keynesian approach which met with the disfavor of both the courts and the populace, leading to his defeat in the elections of 1935.
• The Caribbean saw greatest unemployment during the 1930s because of a reduction of consumption in the U.S. and Canada as well as in Europe.

Asia

• China was at war with Japan during most of the 1930s, in addition to internal struggles between Chiang Kai Shek's nationalists and Mao Zedong's communists.

Australia & Pacific

• In Australia, James Scullin applied orthodox economic principles during the 1930s and cut government spending, which proved ineffective. During the 1940s, John Curtin and Ben Chifley were influenced by Keynesian economics and introduced policies with a New Deal flavour such as: increasing government taxation and spending; imposing economic regulation; and petrol rationing. Along with the stimulus of World War II, these measure proved productive and similar measures remained in place after the war. Chifley outlined these policies in his speech, "The light on the hill"
• In New Zealand, a series of economic and social policies similar to the New Deal were adopted after the election of the first Labour Government in 1935.^[7]

[edit] The First Hundred Days

Having won a decisive victory in the United States presidential election of 1932, and with his party having decisively swept Congressional elections across the nation, Roosevelt entered office with unprecedented political capital. Americans of all political persuasions were demanding immediate action, and Roosevelt responded with a remarkable series of new programs in the “first hundred days” of the administration, in which he met with congress for 100 days. During those 100 days of lawmaking, Congress granted every "request" Roosevelt asked.

[edit] "Bank Holiday" and Emergency Banking Act

With religious language Roosevelt hurled the blame at businessmen and bankers: "Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men....The money changers have fled from their high seats in the temple of our civilization."

By March 4, nearly all banks in the country were closed by their governors, and Roosevelt kept them all closed until he could pass new legislation.^[8] On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's Administration; the act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in "hoarded" currency and gold flowed back into them within a month, thus stabilizing the banking system. During all of 1933, 4,004 small local banks were permanently closed and were merged into larger banks. (Their depositors eventually received 85 cents on the dollar of their deposits.) Anti-New Deal economists Milton Friedman and Anna Schwartz^[9] said, "The 'cure' came close to being worse than the disease." To avoid future "cures" the Congress created the Federal Deposit Insurance Corporation (FDIC) in June, which insured deposits for up to $5,000. The establishment of the FDIC virtually ended the era of "runs" on banks. Roosevelt issued Executive Order 6102 requiring that by next January all private gold be seized and turned in for paper money at the price of $20.67 per ounce. He also made possession of more than $100.00 worth of gold illegal. After January 1934, he then devalued the international value of the dollar by 40% in terms of gold and refused to honor gold obligations on any paper dollars or bonds redeemed.

The economy had hit rock bottom in March 1933 and then started to expand. As historian Broadus Mitchell notes, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically."^[10] Economic indicators show the economy reached nadir in the first days of March, then began a steady, sharp upward recovery. Thus the Federal Reserve Index of Industrial Production hit its lowest point of 52.8 in July 1932 (with 1935-39 = 100) and was practically unchanged at 54.3 in March 1933; however by July 1933, it reached 85.5, a dramatic rebound of 57% in four months. Recovery was steady and strong until 1937. Except for unemployment, the economy by 1937 surpassed the levels of the late 1920s. The Recession of 1937 was a temporary downturn. Private sector employment, especially in manufacturing, recovered to the level of the 1920s but failed to advance further until the war.

Chart 2: Total employment in the United States from 1920 to 1940, excluding farms and WPA.

[edit] Economy Act

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The Economy Act, drafted by Budget Director Lewis Douglas was passed on March 14, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by forty percent. It saved $500 million per year and reassured deficit hawks such as Douglas that the new President was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget, which he balanced, and the "emergency budget," which was needed to defeat the depression; it was imbalanced on a temporary basis.

Roosevelt was initially in favor of balancing the budget, but he soon found himself running spending deficits in order to fund the numerous programs he created. Douglas, however, rejecting the distinction between a regular and emergency budget, resigned in 1934 and became an outspoken critic of the New Deal. Roosevelt strenuously opposed the Bonus Bill that would give World War I veterans a cash bonus. Finally, Congress passed it over his veto in 1936, and the Treasury distributed $1.5 billion in cash as bonus welfare benefits to 4 million veterans just before the 1936 election.

At least until John F. Kennedy in 1960, New Dealers never fully recognized the Keynesian argument for government spending as a vehicle for recovery. Most economists of the era, along with Henry Morgenthau of the Treasury Department, rejected Keynesian solutions and favored balanced budgets and nondenominational conflict.

[edit] Farm programs

Roosevelt was keenly interested in farm issues and emphasized that true prosperity would not return until farming was prosperous. Many different programs were directed at farmers. The first hundred days produced a federal program to protect commercial farmers from the uncertainties of the depression through subsidies and production controls. This program began with the Agricultural Adjustment Act, creating the Agricultural Adjustment Administration (AAA), which Congress passed in May 1933. The act reflected the demands of leaders of major farm organizations, especially the Farm Bureau, and reflected debates among Roosevelt's farm advisers such as Henry A. Wallace, Rexford Tugwell, and George Peek.

The AAA implemented a provision for crop reductions known as the "domestic allotment" system of the act. Under this system, producers of corn, cotton, dairy products, hogs, rice, tobacco, and wheat would decide on production limits for their crops. The AAA would then pay land owners subsidies for leaving some of their land idle with funds provided by a new tax on food processing. Farm prices were to be subsidized up to the point of parity. Some crops were ordered to be destroyed and some livestock slaughtered to maintain prices. The idea was that the less produced, the higher the price, and the farmer would benefit. Farm incomes increased significantly in the first three years of the New Deal. Food prices hardly rose at all, the rise in farm incomes was the result of the subsidies. ^[11] Some revisionist historians say that consumers bore the brunt of (the very slightly) higher food prices and were "horrified with its policy of enforced scarcity."^[12] A Gallup Poll printed in the Washington Post revealed that a majority of the American public opposed the AAA.^[13]

The AAA established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy. The original AAA did not provide for any sharecroppers or tenants or farm laborers who might become unemployed, but there were other New Deal programs especially for them.

Many people lived in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Farm Security Administration (FSA), the Rural Electrification Administration (REA), the Tennessee Valley Authority (TVA) and rural welfare projects sponsored by the WPA, NYA, Forest Service and CCC, including school lunches, building new schools, opening roads in remote areas, reforestation, and purchase of marginal lands to enlarge national forests.

The AAA was the first program on such a scale on behalf of the troubled agricultural economy, and it established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy.

In 1936, the Supreme Court declared the AAA to be unconstitutional, stating that "a statutory plan to regulate and control agricultural production, [is] a matter beyond the powers delegated to the federal government..." The AAA was replaced by a similar program that did win Court approval. Instead of paying farmers for letting fields lie barren, this program instead subsidized them for planting soil enriching crops such as alfalfa that would not be sold on the market. Federal regulation of agricultural production has been modified many times since then, but together with large subsidies it is still in effect in 2008.

WPA employed 2 to 3 million unemployed at unskilled labor.

In 1933, the Administration launched the Tennessee Valley Authority, a project involving dam construction planning on an unprecedented scale in order to curb flooding, generate electricity, and modernize the very poor farms in the Tennessee Valley region of the Southern United States.

[edit] Repeal of Prohibition

In a measure that garnered substantial popular support, Roosevelt, in his first days of office, moved to put to rest one of the most divisive cultural issues of the 1920s. He supported and signed the bill to legalize the manufacture and sale of alcohol, an interim measure pending the repeal of Prohibition, for which a constitutional amendment (the Twenty-first) was already in process. The amendment was ratified later in 1933. Prohibition had been a rather unpopular amendment and led to bootlegging, the illegal manufacture (or importation) and sale of liquor within the United States.

[edit] Puerto Rico

A separate set of programs operated in Puerto Rico, headed by the Puerto Rico Reconstruction Administration. It promoted land reform and helped small farms; it set up farm cooperatives, promoted crop diversification, and helped local industry. The Puerto Rico Reconstruction Administration was directed by Ernest Gruening from 1935 to 1937.

[edit] Reform

[edit] Business, labor, and government cooperation

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Besides all the programs for immediate "relief", the New Deal embarked quickly on an agenda of long-term "reform" aimed at avoiding another depression. The New Dealers responded to demands to inflate the currency by a variety of means. Another group of reformers sought to build consumer and farmer co-ops as a counterweight to big business. The consumer co-ops did not take off, but the Rural Electrification Administration used co-ops to bring electricity to rural areas, many of which still operate. Utilities were also required to sell off their streetcar lines which were then acquired and dismantled by automobile and oil companies.

In the roughly three years between Black Tuesday and Roosevelt's First Hundred Days, the industrial economy had been suffering from a vicious cycle of deflation. Since 1931, the U.S. Chamber of Commerce, the voice of the nation's organized business, had been urging the Hoover Administration to adopt an anti-deflationary scheme that would permit trade associations to cooperate in stabilizing prices within their industries. While existing antitrust laws clearly forbade such practices, organized business found a receptive ear in the Roosevelt Administration.

The Roosevelt Administration, packed with reformers aspiring to forge all elements of society into a cooperative unit (a reaction to the worldwide specter of business-labor "class struggle"), was fairly amenable to the idea of cooperation among producers.

The Administration insisted that business would have to ensure that the incomes of workers would rise along with their prices. The product of all these impulses and pressures was the National Industrial Recovery Act (NIRA) which was passed by Congress in June 1933. The NIRA established the National Planning Board, also called the National Resources Planning Board (NRPB), to assist in planning the economy by providing recommendations and information. Fredric A. Delano was appointed head of the NRPB.

The NIRA guaranteed to workers the right of collective bargaining and helped spur some union organizing activity, but much faster growth of union membership came before the 1935 Wagner Act. The NIRA established the National Recovery Administration (NRA), which attempted to stabilize prices and wages through cooperative "code authorities" involving government, business, and labor. The NRA included a multitude of regulations imposing the pricing and production standards for all sorts of goods and services. Most economists were dubious because it was based on fixing prices to reduce competition.^[14] Historian Jim Power, in FDR's Folly, says that the above-market wage rates dictated by the NRA made it more expensive for employers to hire people, and therefore unnecessarily maintained high unemployment and prolonged the Depression.

To prime the pump and cut unemployment, the NIRA created the Public Works Administration (PWA), a major program of public works. From 1933 to 1935 PWA spent $3.3 billion with private companies to build 34,599 projects, many of them quite large.

[edit] NRA "Blue Eagle" campaign

Main article: National Recovery Administration

NRA Blue Eagle.

At the center of the NIRA was the National Recovery Administration (NRA), headed by former General Hugh Samuel Johnson. Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35 to 45 hours, and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment.

To mobilize political support for the NRA, Johnson launched the "NRA Blue Eagle" publicity campaign to boost his bargaining strength to negotiate the codes with business and labor. The NRA negotiated specific sets of codes with leaders of the nation's major industries; the most important provisions were anti-deflationary floors below which no company would lower prices or wages, and agreements on maintaining employment and production. In a remarkably short time, the NRA won agreements from almost every major industry in the nation. Six months after the NRA went into effect industrial production dropped twenty-five percent. According to some economists, the NRA increased the cost of doing business by forty percent.^[15] Donald Richberg, who soon replaced Johnson as the head of the NRA said:

There is no choice presented to American business between intelligently planned and uncontrolled industrial operations and a return to the gold-plated anarchy that masqueraded as "rugged individualism."...Unless industry is sufficiently socialized by its private owners and managers so that great essential industries are operated under public obligation appropriate to the public interest in them, the advance of political control over private industry is inevitable.^[16]

By the time it ended in May 1935, industrial production was 22% higher than in May 1933. On May 27, 1935, the NRA was found to be unconstitutional by a unanimous decision of the U.S. Supreme Court in the case of Schechter v. United States. On that same day, the Court unanimously struck down the Frazier-Lemke Act portion of the New Deal as unconstitutional. Some libertarians such as Richard Ebeling see these and other rulings striking down portions of the New Deal as preventing the U.S. economic system from becoming a planned economy corporate state.^[17] Governor Huey Long of Louisiana said, "I raise my hand in reverence to the Surpreme Court that saved this nation from fascism."^[18]

Chart 3: Manufacturing employment in the United States from 1920 to 1940.

Employment in private sector factories recovered to the level of the late 1920s by 1937 but did not grow much bigger until the war came and manufacturing employment leaped from 11 million in 1940 to 18 million in 1943.

[edit] Legislative successes and failures

In the spring of 1935, responding to the setbacks in the Court, a new skepticism in Congress, and the growing popular clamor for more dramatic action, the Administration proposed or endorsed several important new initiatives. Historians refer to them as the "Second New Deal" and note that it was more radical, more pro-labor and anti-business than the "First New Deal" of 1933-34. The National Labor Relations Act, also known as the Wagner Act, revived and strengthened the protections of collective bargaining contained in the original NIRA. The result was a tremendous growth of membership in the labor unions comprising the American Federation of Labor. Labor thus became a major component of the New Deal political coalition. Roosevelt nationalized unemployment relief through the Works Progress Administration (WPA), headed by close friend Harry Hopkins. It created hundreds of thousands of low-skilled blue collar jobs for unemployed men (and some for unemployed women and white collar workers). The National Youth Administration was the semi-autonomous WPA program for youth. Its Texas director, Lyndon Baines Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s.

The most important program of 1935, and perhaps the New Deal as a whole, was the Social Security Act,^{[citation needed]} which established a system of universal retirement pensions, unemployment insurance, and welfare benefits for poor families and the handicapped. It established the framework for the U.S. welfare system. Roosevelt insisted that it should be funded by payroll taxes rather than from the general fund; he said, "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program." One of the last New Deal agencies was the United States Housing Authority, created in 1937 with some Republican support to abolish slums.

[edit] Defeat: court packing and executive reorganization

Main article: Judiciary Reorganization Bill of 1937

Roosevelt, however, emboldened by the triumphs of his first term, set out in 1937 to consolidate authority within the government in ways that provoked powerful opposition. Early in the year, he asked Congress to expand the number of justices on the Supreme Court so as to allow him to appoint members sympathetic to his ideas and hence tip the ideological balance of the Court. This proposal provoked a storm of protest.

In one sense, however, it succeeded; Justice Owen Roberts, switched positions and began voting to uphold New Deal measures, effectively creating a liberal majority in West Coast Hotel Co. v. Parrish and National Labor Relations Board v. Jones & Laughlin Steel Corporation thus departing from the Lochner v. New York era and giving the government more power in questions of economic policies. Journalists called this change "the switch in time that saved nine." Recent scholars have noted that since the vote in Parrish took place several months before the court-packing plan was announced, other factors, like evolving jurisprudence, must have contributed to the Court's swing. The opinions handed down in the spring of 1937, favorable to the government, also contributed to the downfall of the plan. In any case, the "court packing plan," as it was known, did lasting political damage to Roosevelt and was finally rejected by Congress in July.

[edit] Attacks right and left

A 1936 cartoon shows the GOP building its platform from the conservative planks abandoned by the Democrats.

Historians on the left denounce Roosevelt for rescuing capitalism when the opportunity was at hand to nationalize banking, railroads and other industries.^[19] Liberal historians argue that Roosevelt restored hope and self-respect to tens of millions of desperate people, built labor unions, upgraded the national infrastructure and saved capitalism in his first term when he could have destroyed it and easily nationalized the banks and the railroads.^[20]

Historians on the right complain that he enlarged the powers of the federal government, built up labor unions, slowed long-term economic growth, and weakened the business community.

Historians on the left have denounced the New Deal as a conservative phenomenon that let slip the opportunity to radically reform capitalism. Since the 1960s, "New Left" historians have been among the New Deal's harsh critics.^[21] Barton J. Bernstein, in a 1968 essay, compiled a chronicle of missed opportunities and inadequate responses to problems. The New Deal may have saved capitalism from itself, Bernstein charged, but it had failed to help—and in many cases actually harmed—those groups most in need of assistance. Paul K. Conkin in The New Deal (1967) similarly chastised the government of the 1930s for its policies toward marginal farmers, for its failure to institute sufficiently progressive tax reform, and its excessive generosity toward select business interests. Howard Zinn, in 1966, criticized the New Deal for working actively to actually preserve the worst evils of capitalism.

Since the 1970s, research on the New Deal has been less interested in the question of whether the New Deal was a "conservative," "liberal" or "revolutionary" phenomenon than in the question of constraints within which it was operating. Political sociologist Theda Skocpol, in a series of articles, has emphasized the issue of "state capacity" as an often-crippling constraint. Ambitious reform ideas often failed, she argued because of the absence of a government bureaucracy with significant strength and expertise to administer them. Other more recent works have stressed the political constraints that the New Deal encountered. Both in Congress and among certain segments of the population conservative inhibitions about government remained strong; thus some scholars have stressed that the New Deal was not just a product of its liberal backers, but also a product of the pressures of its conservative opponents.

[edit] "Broker state"

The federal government commissioned a series of public murals from the artists it employed. William Gropper's "Construction of a Dam" (1939), is characteristic of much of the art of the 1930s, with workers seen in heroic poses, laboring in unison to complete a great public project.

[edit] Government role: balance labor, business and farming

Despite the dismal record in aiding marginal farmers^{[citation needed]}and African Americans^{[citation needed]}, among others—contrasted with its often frequent generosity toward certain business interests—the New Deal was to elevate and strengthen new interest groups so as to allow them to compete more effectively by having the federal government evolve into an arbitrator in competition among all elements and classes of society, acting as a force to help some groups and limit the power of others. By the end of the 1930s, business found itself competing for influence with an increasingly powerful labor movement, one that was engaged in mass mobilization and sometimes militant action; with an organized agricultural economy, and occasionally with aroused consumers. The New Deal accomplished this by creating a series of state institutions that greatly, and permanently, expanded the role of the federal government in American life^{[citation needed]}. The government was now committed to providing at least minimal assistance to the poor and unemployed; to protecting the rights of labor unions; to stabilizing the banking system; to building low-income housing; to regulating financial markets; to subsidizing agricultural production; and to doing many other things that had not previously been federal responsibilities.

Thus, perhaps the strongest legacy of the New Deal was to make the federal government a protector of interest groups and a supervisor of competition among them. As a result of the New Deal, political and economic life became politically more competitive than before, with workers, farmers, consumers, and others now able to press their demands upon the government in ways that in the past had been available only to the corporate world. Hence the frequent description of the government the New Deal created as the "broker state," a state brokering the competing claims of numerous groups^{[citation needed]}. If there was more political competition, there was less market competition. Farmers were not allowed to sell for less than the official price. The transportation industry was tightly regulated so that every firm had a guaranteed market and management and labor had high profits and high wages, all at the cost of high prices and much inefficiency^{[citation needed]}. Quotas in the oil industry were fixed by the Railroad Commission of Texas with Tom Connally's federal Hot Oil Act of 1935 which guaranteed that illegal "hot oil" would not be sold.^[22] To the New Dealers, the free market meant "cut-throat competition" and they considered that evil. It was not until the 1970s and 1980s that most of the New Deal regulations were relaxed.

Thus, it did not transform American capitalism in any genuinely radical way. Except in the field of labor relations, corporate power remained nearly as free from government regulation in 1939 as it had been in 1933, but that changed dramatically during the war, when Washington took control over wage rates, prices, and allocation of raw materials, and sent military officers into munitions plants. All the relief programs were closed down during the war, but one major program survived—Social Security—to become the liberal hallmark of the New Deal into the 21st century.

[edit] African Americans

The New Deal set up numerous agencies to help impoverished farmers, but in the long run they had to move to the cities to become better off. This is an FSA photo of a Texas sharecropper's shack.

The so-called "broker state" offered much less influence to those groups either too weak to demand assistance or not visible enough to arouse widespread public support.

The most notable group to receive much less influence than others in the broker state was African Americans. Many leading New Dealers, including Eleanor Roosevelt, Harold Ickes, Aubrey Williams and Harry Hopkins worked hard to ensure blacks received at least 10% of welfare assistance payments. But the New Deal did not try to undercut segregation or change the second class political status of blacks in the South. Roosevelt did appoint an unprecedented number of blacks to second-level positions in his Administration that collectively were called the Black Cabinet, perhaps under the influence of his wife, Eleanor Roosevelt, a vocal advocate of easing discrimination. Roosevelt and Hopkins worked with big city mayors to welcome black political organizations that made the transition from the Republican Party to the Democratic Party in 1934-36.

The WPA, NYA, and CCC relief programs allocated 10% of their budgets to blacks (who comprised about 10% of the total population, and 20% of the poor). They operated separate all-black units with the same pay and conditions as white units. The black community responded favorably, so that by 1936 the majority who voted (usually in the North) were voting Democratic. This was a sharp realignment from 1932, when most African Americans preferred the Republican ticket. The New Deal thus established a political alliance between blacks and the Democratic Party that survives into the 21st century.

Roosevelt believed that other matters were far more pressing than racial discrimination. Never willing to lose the support of Southern Congressional Democrats, he declined to support legislation making lynching a federal crime, while denouncing lynching in speeches. He declined to advocate banning the poll tax, used by Southern whites to deny the vote to Southern blacks. He refused to use the relief agencies to challenge local patterns of discrimination: the NRA tolerated widespread practices of paying blacks less than whites; blacks were largely excluded from employment at the TVA; the FHA refused to provide mortgages to blacks moving into white neighborhoods; and the AAA was ineffectual in protecting the interests of black sharecroppers and tenant farmers.

Some liberal historians argue the New Deal laid the ground work for the blacks to be expanded a generation later, mostly through the work of the next wave of liberal reform—the civil rights movement and the Great Society—to embrace groups marginalized in the 1930s. However, many African American historians insist that the civil rights movement owed everything to black activists, and very little to the New Deal. The New Deal was especially beneficial to white ethnic minorities, who responded with 80-90% of their votes for Roosevelt's reelection.

[edit] Recession of 1937 and recovery

After almost a decade of the New Deal, some critics were disappointed that the New Deal did not live up to its promise.

The Roosevelt Administration was under assault during FDR's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued through most of 1938. Production declined sharply, as did profits and employment. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. Keynesian economists speculated that this was a result of a premature effort to curb government spending and balance the budget, while conservatives said it was caused by attacks on business and by the huge strikes caused by the organizing activities of the CIO and the American Federation of Labor (AFL).

Roosevelt rejected the advice of Morgenthau to cut spending and decided big business was trying to ruin the New Deal by causing another depression that voters would react against by voting Republican.^[23] It was a "capital strike" said Roosevelt, and he ordered the FBI to look for a criminal conspiracy (they found none).^[24] Roosevelt moved left and unleashed a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis.^[25] Ickes attacked automaker Henry Ford, steelmaker Tom Girdler, and the superrich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States."^[26] Left unchecked, Ickes warned, they would create "big-business Fascist America—an enslaved America." The President appointed Robert Jackson as the aggressive new director of the antitrust division of the Justice Department, but this effort lost its effectiveness once World War II began and big business was urgently needed to produce war supplies.^[27]

But the Administration's other response to the 1937 deepening of the Great Depression had more tangible results. Ignoring the vitriolic pleas of the Treasury Department and responding to the urgings of the converts to Keynesian economics and others in his Administration, Roosevelt embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power. The New Deal had in fact engaged in deficit spending since 1933, but it was apologetic about it, because a rise in the national debt was opposite of what the Democratic party had always preached. Now they had a theory to justify what they were doing. Roosevelt explained his program in a fireside chat in which he finally acknowledged that it was therefore up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation."

Business-oriented observers explained the recession and recovery in very different terms from the Keynesians. They argued that the New Deal had been very hostile to business expansion in 1935-37, had encouraged massive strikes which had a negative impact on major industries such as automobiles, and had threatened massive anti-trust legal attacks on big corporations. All those threats diminished sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.

Lawrence Reed notes that "when a nationally representative poll by the American Institute of Public Opinion in the spring of 1939 asked, 'Do you think the attitude of the Roosevelt administration toward business is delaying business recovery?' the American people responded 'yes' by a margin of more than two-to-one. The business community felt even more strongly so"^[15] Roosevelt's Treasury Secretary, Henry Morgenthau, said in May 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot."

[edit] World War II and the end of the Great Depression

The Depression, however, continued until the U.S. entered the Second World War. Under the special circumstances of war mobilization, massive war spending doubled the Gross National Product. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output as an expression of patriotism. Patriotism drove most people to voluntarily work overtime and give up leisure activities to make money after so many hard years. Patriotism meant that people accepted rationing and price controls for the first time. Cost-plus pricing in munitions contracts guaranteed that businesses would make a profit regardless of how many mediocre workers they employed and how inefficient the techniques they used. The demand was for a vast quantity of war supplies as soon as possible, regardless of cost. Business hired every person in sight, even driving sound trucks up and down city streets begging people to apply for jobs. New workers were needed to replace the 12 million working-age men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state. However, spending on the New Deal was far smaller than on the war effort.

In the first peacetime year of 1946, federal spending still amounted to $62 billion, or 30% of GNP. Wartime spending and other measures were able to provide an enormous output. Between 1939 and 1944, the peak of wartime production, the nation's total output almost doubled. This, along with the conscription and removal of soldiers, meant that civilian unemployment plummeted—from 14% in 1940 to less than 2% in 1943 as the labor force grew by ten million. Millions of farmers left marginal operations, students quit school, and housewives returned to the labor force. The war economy was not run on the basis of free enterprise, but was the result of government/business cooperation, with government bankrolling business.

A major result of the full employment at high wages was a sharp, permanent decrease in the level of income inequality. The gap between rich and poor narrowed dramatically in the area of nutrition, because food rationing and price controls guaranteed a reasonably priced diet to everyone. Large families that had been poverty-stricken in the 1930s had four or five or more workers, and shot to the top one-third income bracket. Overtime made for huge paychecks in the munitions factories; white collar workers were fully employed too, but they did not receive overtime and their salary scale was no longer much higher than the blue collar wage scale.

Economist Robert Higgs (1987), argues that the war did not end the Great Depression. Rather, a return to normality after the war, as the government relaxed wage controls, price controls, capital controls, reduced tariffs and other trade barriers, and eliminated the rationing of goods and the relaxing of Federal control over American industries, ended it.

[edit] Conflicting interpretation of the New Deal economic policies

[edit] Depression statistics

"Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically."^[28] Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began recovering until the recession of 1937-1938. Thus the Federal Reserve Industrial Production Index hit its low of 52.8 on 1932-07-01 and was practically unchanged at 54.3 on 1933-03-01; however by 1933-07-01, it reached 85.5 (with 1935-39 = 100, and for comparison 2005 = 1,342).^[29] In Roosevelt's twelve years in office the economy had an 8.5% compound annual growth of GDP,^[30] the highest growth rate in the history of any industrial country,^[31] however, recovery was slow—by 1939 Gross Domestic Product (GDP) per adult was still 27% below trend.^[32]

(1) in 1929 dollars (2) 1935-39 = 100

Darby counts WPA workers as employed; Lebergott as unemployed source: Historical Statistics US(1976) series D-86; Smiley 1983^[34]

[edit] Relief statistics

Families on Relief 1936-41

[edit] Prolonged/worsened the Depression

Virtually all^{[citation needed]} historians believe that the New Deal helped resolve the Great Depression, but economists are less certain, with a substantial minority believing that it actually worsened the depression.^[35] A 1995 survey of economic historians asked whether "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of those in economics departments 27% agreed, 22% agreed 'with provisos' (what provisos the survey does not state) and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed. [1]

The minority view is represented by Harold L. Cole and Lee E. Ohanian who argue that the "New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planners had hoped," but that the "New Deal policies are an important contributing factor to the persistence of the Great Depression." They claim that the New Deal "cartelization policies are a key factor behind the weak recovery." They say that the "abandonment of these policies coincided with the strong economic recovery of the 1940s."^[36] Lowell E. Gallaway and Richard K. Vedder argue that the "Great Depression was very significantly prolonged in both its duration and its magnitude by the impact of New Deal programs." They suggest that without Social Security, work relief, unemployment insurance, mandatory minimum wages, and without special government-granted privileges for labor unions, business would have hired more workers and the unemployment rate during the New Deal years would have been 6.7% instead of 17.2%.^[37]

[edit] National debt

national debt/ GNP climbs from 20% to 40% under Hoover; levels off under FDR; soars during WW2 from Historical States US (1976).

The New Deal tried public works, farm subsidies and other devices to reduce unemployment, but Roosevelt never completely gave up trying to balance the budget. Unemployment remained high throughout the New Deal years though greatly reduced from the much higher rates before the New Deal; business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had. Keynesians later argued that by spending vastly more money—using fiscal policy—the government could provide the needed stimulus through the "multiplier" effect. Critics of Keynesianism said that would just take money out of the private sector, causing a negative multiplier effect there.^{[citation needed]}However, no economist has written a full-scale Keynesian analysis of the depression, so it is difficult to evaluate how that model would work.

Although Hopkins denied saying "Spend-Spend-Spend; Tax-Tax-Tax; Elect-Elect-Elect," conservative critics thought it fit the New Deal very well.

In recent years more influential among economists has been the monetarist interpretation of Milton Friedman, which did include a full-scale monetary history of what he calls the "Great Contraction." Friedman concentrated on the failures before 1933, and in his memoirs said the relief programs were an appropriate response. From 1935 to 1943, Friedman was a Keynesian who was (1941-43) an official spokesman for the New Deal before Congress; he did not at that time criticize any New Deal or Federal Reserve policies.

Apart from building up labor unions^{[citation needed]}, the New Deal did not substantially alter the distribution of power within American capitalism.

Keynes visited to the White House in 1934 to urge President Roosevelt to do more deficit spending. Roosevelt complained to Labor Secretary Frances Perkins, "He left a whole rigmarole of figures--he must be a mathematician rather than a political economist.^{[citation needed]}"

[edit] Fiscal conservatism

Fiscal conservatism was a key component of the New Deal, as Zelizer (2000) proves. It was supported by Wall Street and local investors and most of the business community; mainstream academic economists believed in it, as apparently did the majority of the public. Conservative southern Democrats, who favored balanced budgets and opposed new taxes, controlled Congress and its major committees. Even liberal Democrats at the time regarded balanced budgets as essential to economic stability in the long run, although they were more willing to accept short-term deficits. Public opinion polls consistently showed public opposition to deficits and debt. Throughout his terms, Roosevelt recruited fiscal conservatives to serve in his Administration, most notably Lewis Douglas the Director of Budget from 1933 to 1934, and Henry Morgenthau Jr., Secretary of the Treasury from 1934 to 1945. They defined policy in terms of budgetary cost and tax burdens rather than needs, rights, obligations, or political benefits. Personally the President embraced their fiscal conservatism. Politically, he realized that fiscal conservatism enjoyed a strong wide base of support among voters, leading Democrats, and businessmen. On the other hand there was enormous pressure to act – and spending money on high visibility programs attracted Roosevelt, especially if it tied millions of voters to him, as did the WPA.

Douglas proved too inflexible, and he quit in 1934. Morgenthau made it his highest priority to stay close to Roosevelt, no matter what. Douglas's position, like many of the Old Right, was grounded in a basic distrust of politicians and the deeply ingrained fear that government spending always involved a degree of patronage and corruption that offended his Progressive sense of efficiency. The Economy Act of 1933, passed early in the Hundred Days, was Douglas' great achievement. It reduced federal expenditures by $500 million, to be achieved by reducing veterans’ payments and federal salaries. Douglas cut government spending through executive orders that cut the military budget by $125 million, $75 million from the Post Office, $12 million from Commerce, $75 million from government salaries, and $100 million from staff layoffs. As Freidel concludes, "The economy program was not a minor aberration of the spring of 1933, or a hypocritical concession to delighted conservatives. Rather it was an integral part of Roosevelt's overall New Deal."^[38] Revenues were so low that borrowing was necessary (only the richest 3% paid any income tax between 1926 and 1940.^[39]) Douglas therefore hated the relief programs, which he said reduced business confidence, threatened the government’s future credit, and had the "destructive psychological effects of making mendicants of self-respecting American citizens."^[40] Roosevelt was pulled toward greater spending by Hopkins and Ickes, and as the 1936 election approached he decided to gain votes by attacking big business.

Morgenthau shifted with FDR, but at all times tried to inject fiscal responsibility; he deeply believed in balanced budgets, stable currency, reduction of the national debt, and the need for more private investment . The Wagner Act met Morgenthau’s requirement because it strengthened the party’s political base and involved no new spending. In contrast to Douglas, Morgenthau accepted Roosevelt’s double budget as legitimate–that is a balanced regular budget, and an “emergency” budget for agencies, like the WPA, PWA and CCC, that would be temporary until full recovery was at hand. He fought against the veterans’ bonus until Congress finally overrode Roosevelt’s veto and gave out $2.2 billion in 1936. His biggest success was the new Social Security program; he managed to reverse the proposals to fund it from general revenue and insisted it be funded by new taxes on employees. It was Morgenthau who insisted on excluding farm workers and domestic servants from Social Security because workers outside industry would not be paying their way.^[41]

[edit] Charges of Communism

Right wing critics complained that the New Deal was infiltrated with communists. The most important group (in the Department of Agriculture) was fired in 1934, but Whittaker Chambers and Alger Hiss went deeper underground.^[42] Outside government, the far left was exerting considerable influence in the labor movement (it dominated the new CIO) and was building a network of membership organizations. Thus the American League Against War and Fascism was formed in 1933 and, in 1937, became the American League for Peace and Democracy. There followed the America Youth Congress, 1934; League of American Writers, 1935; National Negro Congress, 1936; and the American Congress for Democracy and Intellectual Freedom, 1939. All had significant communist connections, and fought furious battles with the anti-communist left.^[43]

[edit] Charges of Fascism

Further information: The New Deal and corporatism and Fascism and ideology

The term "fascism" in the 21st century has connotations of mass murder and death camps. However, in the 1930s it meant the planned economy and corporativism exemplified by the economic plans of Benito Mussolini in Italy. And, comparisons have been made between the economic systems of Fascist Italy and the New Deal programs. Communists, classical liberals, conservatives, and Herbert Hoover used the term fascism in that manner at that time. Likewise, modern-day paleoconservatives argue that the New Deal was a major milestone in the rise of America's managerial state^{[citation needed]}.

Discontent with the economic downturn in the U.S. had stimulated widespread interest in the fascist programs of Italy and Germany.^[44] Benito Mussolini praised the New Deal as following his own economic program, saying in the New York Times, "Your plan for coordination of industry follows precisely our lines of cooperation."^[45] Roosevelt's personal letters reveal that he was impressed by what Mussolini was doing and said that he kept in close touch with that "admirable gentlemen."^[46] Ronald Reagan, who had at the time been a strong supporter of the New Deal, later reversed positions and claimed in 1976, "Fascism was really the basis for the New Deal.^{[citation needed]}" Journalist John T. Flynn, a former socialist, in his 1944 book As We Go Marching, said that "the New Dealers...began to flirt with the alluring pastime of reconstructing the capitalist system...and in the process of this new career they began to fashion doctrines that turned out to be the principles of fascism."

Former President Herbert Hoover argued that some (but not all) New Deal programs were "fascist," and that there was a presidential dictatorship. [Memoirs 3:420]

"Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933 .... These ideas were first suggested by Gerald Swope (of the General Electric Company)....[and] the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part proved true."

In 1934, Roosevelt defended himself against his critics, and attacked them in his "fireside chat" radio audiences. Some people, he said:

will try to give you new and strange names for what we are doing. Sometimes they will call it 'Fascism,' sometimes 'Communism,' sometimes 'Regimentation,' sometimes 'Socialism.' But, in so doing, they are trying to make very complex and theoretical something that is really very simple and very practical. . . . Plausible self-seekers and theoretical die-hards will tell you of the loss of individual liberty. Answer this question out of the facts of your own life. Have you lost any of your rights or liberty or constitutional freedom of action and choice?^[47]

In September 1934, Roosevelt defended a more powerful national government as he believed was necessary to control the economy, by quoting conservative Republican Elihu Root:

The tremendous power of organization [Root had said] has combined great aggregations of capital in enormous industrial establishments . . . so great in the mass that each individual concerned in them is quite helpless by himself. . . . The old reliance upon the free action of individual wills appears quite inadequate. . . . The intervention of that organized control we call government seems necessary. . . . Men may differ as to the particular form of governmental activity with respect to industry or business, but nearly all are agreed that private enterprise in times such as these cannot be left without assistance and without reasonable safeguards lest it destroy not only itself but also our process of civilization.^[48]

Other scholars reject linking the New Deal to fascism as overly simplistic. As a leading historian of fascism explains, "What Fascist corporatism and the New Deal had in common was a certain amount of state intervention in the economy. Beyond that, the only figure who seemed to look on Fascist corporatism as a kind of model was Hugh Johnson, head of the National Recovery Administration."^[49] Johnson strenuously denied any association with Mussolini, saying the NRA "is being organized almost as you would organize a business. I want to avoid any Mussolini appearance—the President calls this Act industrial self-government."^[50] Donald Richberg eventually replaced General Hugh Johnson as head of NRA and speaking before a Senate committee said "A nationally planned economy is the only salvation of our present situation and the only hope for the future."^[51] Historians such as Hawley (1966) have examined the origins of the NRA in detail, showing the main inspiration came from Senators Hugo Black and Robert F. Wagner and from American business leaders such as the Chamber of Commerce. The main model was Woodrow Wilson's War Industries Board, in which Johnson had been involved.

[edit] Art and music

The Works Progress Administration subsidized artists, musicians, painters and writers on relief with a group of projects called Federal One. While the WPA program was by the most widespread, it was preceded by three programs administered by the US Treasury which hired commercial artists at usual commissions to add murals and sculptures to federal buildings. The first of these efforts was the short-lived Public Works of Art Project, organized by Edward Bruce, an American businessman and artist. Bruce also led the Treasury Department's Section of Painting and Sculpture (later renamed the Section of Fine Arts) and the Treasury Relief Art Project (TRAP). The Resettlement Administration (RA) and Farm Security Administration (FSA) had major photography programs. The New Deal arts programs emphasized regionalism, socialist realism, class conflict, proletarian interpretations, and audience participation. The unstoppable collective powers of common man, contrasted to the failure of individualism, was a favorite theme.^[52]

The FSA photography project is most responsible for creating the image of the Depression in the U.S. Many of the images appeared in popular magazines. The photographers were under instruction from Washington as to what overall impression the New Deal wanted to give out. Director Roy Stryker's agenda focused on his faith in social engineering, the poor conditions among cotton tenant farmers, and the very poor conditions among migrant farm workers; above all he was committed to social reform through New Deal intervention in people's lives. Stryker demanded photographs that "related people to the land and vice versa" because these photographs reinforced the RA's position that poverty could be controlled by "changing land practices." Though Stryker did not dictate to his photographers how they should compose the shots, he did send them lists of desirable themes, such as "church", "court day", "barns".^[53] New Deal era films such as Citizen Kane ridiculed so-called "great men", while class warfare appeared in numerous movies, such as Meet John Doe and The Grapes of Wrath.

By contrast there was also a smaller but influential stream of anti-New Deal art. Thus Gutzon Borglum's sculptures on Mount Rushmore emphasized great men in history (his designs had the approval of Calvin Coolidge). Gertrude Stein and Ernest Hemingway disliked the New Deal and celebrated the organic autonomy of perfected written work in opposition to the New Deal trope of writing as performative labor. The Southern Agrarians celebrated a premodern regionalism and opposed the TVA as a modernizing, disruptive force. Under Chief Justice Charles Evans Hughes, the Supreme Court built one of the most architecturally striking buildings; its classical lines and small size contrasted sharply with the gargantuan modernistic federal buildings in Washington. Hollywood managed to synthesize both streams, as in Busby Berkeley's Gold Digger musicals, where the storylines exalt individual autonomy while the spectacular musical numbers show abstract populations of interchangeable dancers securely contained within patterns beyond their control.^[54]

[edit] Legacies

The New Deal was the inspiration for President Lyndon B. Johnson's Great Society in 1960s. Johnson (on right) headed the Texas NYA and was elected to Congress in 1938.

Some economists argue that although the New Deal did not end the depression, it helped to prevent the economy from decaying further by increasing the regulatory functions of the federal government in ways that helped stabilize previous trouble areas of the economy: the stock market, the banking system, and others. Others, like Thomas Woods in The Politically Incorrect Guide to American History and Jim Powell in FDR's Folly, argue it worsened the depression or delayed recovery. All analysts agree the New Deal produced a new political coalition that sustained the Democratic Party as the majority party in national politics for more than a generation after its own end.

During Roosevelt's 12 years in office, there was a dramatic increase in the power of the federal government as a whole. Roosevelt also established the presidency as the prominent center of authority within the federal government. By creating a large array of agencies protecting various groups of citizens—workers, farmers, and others—who suffered from the crisis, enabling them to challenge the powers of the corporations, the Roosevelt Administration generated a set of political ideas—known to later generations as New Deal liberalism—that remained a source of inspiration and controversy for decades and that helped shape the next great experiment in liberal reform, the Great Society of the 1960s. The wartime FEPC executive orders that forbade job discrimination against African Americans, women, and ethnic groups was a major breakthrough that brought better jobs and pay to millions of minority Americans. Historians usually treat FEPC as part of the war effort and not part of the New Deal itself.

[edit] Political metaphor

Since 1933, politicians and pundits have often called for a "new deal" regarding an object. That is, they demand a completely new, large-scale approach to a project. As Arthur A. Ekirch Jr. (1971) has shown, the New Deal stimulated utopianism in American political and social thought on a wide range of issues. In Canada, Conservative Prime Minister Richard B. Bennett in 1935 proposed a "new deal" of regulation, taxation, and social insurance that was a copy of the American program; Bennett's proposals were not enacted, and he was defeated for reelection in October 1935. In accordance with the rise of the use of U.S. political phraseology in Britain, the Labour Government of Tony Blair has termed some of its employment programs "new deal", in contrast to the Conservative Party's promise of the 'British Dream'.

[edit] Notable New Deal programs

The "alphabet soup" agencies of the New Deal included the TVA, CCC, WPA, FDIC, SEC and NRA.

The New Deal had countless programs, labeled an "alphabet soup" by its detractors. Among the New Deal acts were the following, most of them passed within the first 100 days of Roosevelt's Administration. Most were abolished around 1943; others remain in operation in 2008:

• Reconstruction Finance Corporation a Hoover agency expanded under Jesse Holman Jones to make large loans to big business. Ended in 1954.
• Federal Emergency Relief Administration (FERA) a Hoover program to create unskilled jobs for relief; replaced by WPA in 1935.
• United States bank holiday, 1933: closed all banks until they became certified by federal reviewers
• Abandonment of gold standard, 1933: gold reserves no longer backed currency; still exists
• Civilian Conservation Corps (CCC), 1933: employed young men to perform unskilled work in rural areas; under United States Army supervision; separate program for Native Americans
• Tennessee Valley Authority (TVA), 1933: effort to modernize very poor region (most of Tennessee), centered on dams that generated electricity on the Tennessee River; still exists
• Agricultural Adjustment Act (AAA), 1933: raised farm prices by cutting total farm output of major crops and livestock
• National Recovery Act (NRA), 1933: industries set up codes to reduce unfair competition, raise wages and prices;
• Public Works Administration (PWA), 1933: built large public works projects; used private contractors (did not directly hire unemployed)
• Federal Deposit Insurance Corporation (FDIC) / Glass-Steagall Act: insures deposits in banks in order to restore public confidence in banks; still exists
• Securities Act of 1933, created the SEC, 1933: codified standards for sale and purchase of stock, required risk of investments to be accurately disclosed; still exists
• Civil Works Administration (CWA), 1933-34: provided temporary jobs to millions of unemployed
• Indian Reorganization Act, 1934: moved away from assimilation
• Social Security Act (SSA), 1935: provided financial assistance to: elderly, handicapped, paid for by employee and employer payroll contributions; required years contributions, so first payouts were in 1942; still exists
• Works Progress Administration (WPA), 1935: a national labor program for more than 2 million unemployed; created useful construction work for unskilled men; also sewing projects for women and arts projects for unemployed artists, musicians and writers.
• National Labor Relations Act (NLRA) / Wagner Act, 1935: set up National Labor Relations Board to supervise labor-management relations; In the 1930s, it strongly favored labor unions. Modified by the Taft-Hartley Act (1947); still exists
• Judicial Reorganization Bill, 1937: gave the President power to appoint a new Supreme Court judge for every judge 70 years or older; failed to pass Congress
• Fair Labor Standards Act (29 U.S. Code Chapter 8), 1938: established a maximum normal work week of 40 hours and a minimum wage of 40 cents/hour and outlawed most forms of child labor; still exists
• Federal Surplus Relief Corporation, later changed to the Federal Surplus Commodities Corporation, named the Agriculture Secretary, Administrator of Agricultural Adjustment Administration, and Governor of Farm Credit Administration as its Board of Directors. It was continued as an agency under the Secretary of Agriculture by acts of June 28, 1937 (50 Stat. 323) and February 16, 1938 (52 Stat. 38), consolidated in 1940 with the Division of Marketing and Marketing Agreements into the Surplus Marketing Administration, and finally merged into the Agricultural Marketing Administration by Executive Order 9069 of February 23, 1942.

[edit] See also

• Arthurdale, New Deal planned community.
• Brain Trust, advisers to President Roosevelt
• Critics of the New Deal
• Fireside chats
• Great Depression
• Great Society, President Lyndon Johnson's economic policy
• New Deal coalition
• World War II

[edit] Notes

[edit] References

• Bureau of the Census, Statistical Abstract of the United States: 1951 (1951) full of useful data; online
• Bureau of the Census, Historical Statistics of the United States: Colonial Times to 1970 (1976)
• Cantril, Hadley and Mildred Strunk, eds. Public Opinion, 1935-1946 (1951), massive compilation of many public opinion polls
• Carter, Susan B. et al eds. The Historical Statistics of the United States (6 vol: Cambridge UP, 2006); huge compilation of statistical data; online at some universities
• Gallup, George Horace, ed. The Gallup Poll; Public Opinion, 1935-1971 3 vol (1972) summarizes results of each poll.
• Lowitt, Richard and Beardsley Maurice, eds. One Third of a Nation: Lorena Hickock Reports on the Great Depression (1981)
• Moley, Raymond. After Seven Years (1939), conservative memoir by ex-Brain Truster
• Nixon, Edgar B. ed. Franklin D. Roosevelt and Foreign Affairs (3 vol 1969), covers 1933-37. 2nd series 1937-39 available on microfiche and in a 14 vol print edition at some academic libraries.
• Roosevelt, Franklin D.; Rosenman, Samuel Irving, ed. The Public Papers and Addresses of Franklin D. Roosevelt (13 vol, 1938, 1945); public material only (no letters); covers 1928-1945.
• Documentary History of the Franklin D. Roosevelt Administration 20 vol. available in some large academic libraries.
• Zinn, Howard, ed. New Deal Thought (1966), a compilation of primary sources.

[edit] Further reading

• Allswang, John. The New Deal and American Politics (1978), voting analysis
• Alter, Jonathan. The Defining Moment: FDR's Hundred Days and the Triumph of Hope (2006), popular account
• Badger, Anthony J. The New Deal: The Depression Years, 1933-1940. (2002) general survey from British perspective
• Beasley, Maurine H., Holly C. Shulman, Henry R. Beasley. The Eleanor Roosevelt Encyclopedia (2001)
• Bernstein, Barton J. "The New Deal: The Conservative Achievements of Liberal Reform." In Barton J. Bernstein, ed., Towards a New Past: Dissenting Essays in American History, pp. 263-88. (1968), an influential New Left attack on the New Deal.
• Bernstein, Irving. Turbulent Years: A History of the American Worker, 1933-1941 (1970), cover labor unions
• Best, Gary Dean. The Critical Press and the New Deal: The Press Versus Presidential Power, 1933-1938 (1993) ISBN 027594350X
• Best, Gary Dean. Pride, Prejudice, and Politics: Roosevelt Versus Recovery, 1933-1938. (1990) ISBN 0275935248
• Best, Gary Dean. Retreat from Liberalism: Collectivists versus Progressives in the New Deal Years (2002) ISBN 0275946568
• Blumberg Barbara. The New Deal and the Unemployed: The View from New York City (1977).
• Bremer William W. "Along the American Way: The New Deal's Work Relief Programs for the Unemployed." Journal of American History 62 (December 1975): 636-652. online at JSTOR in most academic libraries
• Brock William R. Welfare, Democracy and the New Deal (1988), a British view
• Brinkley, Alan. The End Of Reform: New Deal Liberalism in Recession and War. (1995) what happened after 1937
• Burns, Helen M. The American Banking Community and New Deal Banking Reforms, 1933-1935 (1974)
• Chafe, William H. ed. The Achievement of American Liberalism: The New Deal and its Legacies (2003)
• Charles, Searle F. Minister of Relief: Harry Hopkins and the Depression (1963)
• Cobb, James and Michael Namaroto, eds. The New Deal and the South (1984).
• Conkin, Paul K. The New Deal. (1967), a brief New Left critique.
• Dubofsky, Melvyn, ed. The New Deal: Conflicting Interpretations and Shifting Perspectives. (1992), reader
• Eden, Robert, ed. New Deal and Its Legacy: Critique and Reappraisal (1989), essays by scholars
• Ekirch Jr., Arthur A. Ideologies and Utopias: The Impact of the New Deal on American Thought (1971)
• Fraser, Steve and Gary Gerstle, eds., The Rise and Fall of the New Deal Order, (1989), essays focused on the long-term results.
• Garraty, John A. "The New Deal, National Socialism, and the Great Depression," American Historical Review, 78, 4 (1973), pp. 907-44. in JSTOR
• Goldman, Eric F. Rendezvous with Destiny: A History of Modern American Reform. New York : Alfred A. Knopf (1952) ISBN 1566633699
• Gordon, Colin. New Deals: Business, Labor, and Politics, 1920-1935 (1994)
• Graham, Otis L. and Meghan Robinson Wander, eds. Franklin D. Roosevelt: His Life and Times. (1985). An encyclopedic reference.
• Grant, Michael Johnston. Down and Out on the Family Farm: Rural Rehabilitation in the Great Plains, 1929-1945 (2002)
• Hawley, Ellis W. The New Deal and the Problem of Monopoly (1966)
• Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government (1987), libertarian critique
• Howard, Donald S. The WPA and Federal Relief Policy (1943)
• Ingalls, Robert P. Herbert H. Lehman and New York's Little New Deal (1975)
• Jensen, Richard J. "The Causes and Cures of Unemployment in the Great Depression," Journal of Interdisciplinary History 19 (1989) 553-83. online at JSTOR
• Kennedy, David M. Freedom From Fear: The American People in Depression and War, 1929-1945. (1999), survey
• Richard S. Kirkendall. "The New Deal As Watershed: The Recent Literature," The Journal of American History, Vol. 54, No. 4. (Mar., 1968), pp. 839-852. in JSTOR, historiography
• Ladd, Everett Carll and Charles D. Hadley. Transformations of the American Party System: Political Coalitions from the New Deal to the 1970s (1975), voting behavior
• Leff, Mark H. The Limits of Symbolic Reform: The New Deal and Taxation (1984)
• Leuchtenberg, William E. Franklin D. Roosevelt and the New Deal, 1932-1940. (1963). A standard interpretive history.
• Lindley, Betty Grimes and Ernest K. Lindley. A New Deal for Youth: The Story of the National Youth Administration (1938)
• Lowitt, Richard. The New Deal and the West (1984).
• McElvaine Robert S. The Great Depression 2nd ed (1993), social history
• Manza; Jeff. "Political Sociological Models of the U.S. New Deal" Annual Review of Sociology: 2000, 26 (2000): 297-322.
• Mathews, Jane De Hart. "Arts and the People: The New Deal Quest for a Cultural Democracy," Journal of American History 62 (1975): 316-39, in JSTOR
• Malamud; Deborah C. "'Who They Are - or Were': Middle-Class Welfare in the Early New Deal" University of Pennsylvania Law Review v 151 #6 2003. pp 2019+.
• McKinzie, Richard. The New Deal for Artists (1984), well illustrated scholarly study
• Meriam; Lewis. Relief and Social Security The Brookings Institution. 1946. Highly detailed analysis and statistical summary of all New Deal relief programs
• Milkis, Sidney M. and Jerome M. Mileur, eds. The New Deal and the Triumph of Liberalism (2002)
• Mitchell, Broadus. Depression Decade: From New Era through New Deal, 1929-1941 (1947), survey by economic historian
• Parker, Randall E. Reflections on the Great Depression (2002) interviews with 11 leading economists
• Patterson, James T. The New Deal and the States: Federalism in Transition (Princeton UP, 1969).
• Powell, Jim FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression (2003) ISBN 0761501657
• Rosenof, Theodore. Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993 (1997)
• Rosen, Elliot A. Roosevelt, the Great Depression, and the Economics of Recovery (2005) ISBN 0813923689
• [2] Rothbard, Murray. America's Great Depression (1963).
• Saloutos, Theodore. The American Farmer and the New Deal (1982).
• Savage, James D. Balanced Budgets & American Politics. Cornell University Press. 1988.
• Schlesinger, Arthur M. Jr., The Age of Roosevelt, 3 vols, (1957-1960), the classic narrative history. Online at vol 2 vol 3
• Singleton, Jeff. The American Dole: Unemployment Relief and the Welfare State in the Great Depression (2000)
• Sitkoff, Harvard. A New Deal for Blacks (1978).
• Sitkoff, Harvard. ed. Fifty Years Later: The New Deal Evaluated. (New York; McGraw Hill, 1984). A friendly liberal evaluation.
• Skocpol, Theda, and Kenneth Finegold. "State Capacity and Economic Intervention in the Early New Deal." Political Science Quarterly 97 (1982): 255-78. Online at JSTOR .
• Skocpol, Theda, and Kenneth Finegold. "Explaining New Deal Labor Policy" American Political Science Review (1990) 84:1297-1304 online at JSTOR
• Smith, Jason Scott. Building New Deal Liberalism: The Political Economy of Public Works, 1933-1956 (2005).
• Sternsher, Bernard ed., Hitting Home: The Great Depression in Town and Country (1970), essays by scholars on local history
• Szalay, Michael. New Deal Modernism: American Literature and the Invention of the Welfare State (2000)
• Tindall George B. The Emergence of the New South, 1915-1945 (1967). survey of entire South
• Trout Charles H. Boston, the Great Depression, and the New Deal (1977)
• Ware, Susan. Beyond Suffrage: Women and the New Deal (1981)
• Wecter, Dixon. The Age of the Great Depression, 1929-1941 (1948), social history
• Zelizer; Julian E. "The Forgotten Legacy of the New Deal: Fiscal Conservatism and the Roosevelt Administration, 1933-1938" Presidential Studies Quarterly . Volume: 30. Issue: 2. pp: 331+. (2000)

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